Simon Xie: Jack Ma's unassuming lieutenant at Alibaba

Inside Alibaba, where co-founders are revered like rock stars, relatively few employees know about the soft-spoken executive who for years kept his same cramped office, unfashionable clothes and the self-effacing demeanor of a metalworker's son.

But for investors in Alibaba Group Holding's potentially record initial public offering, Simon Xie, a co-founder and vice president, represents one of the e-commerce company's most important figures: he's the only individual besides Executive Chairman Jack Ma who owns the domestic Chinese companies and holds the operating licenses that underpin Alibaba's corporate structure.

Alongside Ma, who holds the lion's share of those domestic firms, Xie wields full legal sway over the onshore entities and the critical contracts that link them with the New York-listed vehicle.

Yet much remains unknown about Xie, and the unusual shareholding arrangement has puzzled even high-level insiders. Some employees, said a former executive who worked closely with Xie, jokingly refer to the unassuming 45-year-old as shoufu - or "top millionaire" - even though he is not among the very top Alibaba shareholders.

In 15 years, Xie has given just one published interview, to his hometown newspaper. He helps run - but does not lead - Alibaba's investment division and was not named in a recently published list of 30 managers who form Alibaba's steering committee. But the low profile belies Xie's status as one of Ma's most trusted business partners, multiple former executives and outside analysts say.

"Simon Xie is clearly the most important person in Alibaba who is not part of the steering committee," said Fredrik Oqvist, the Beijing-based founder and CEO of China RAI, a consulting firm that advises hedge and mutual funds. "He pops up everywhere, yet he's elusive."

Alibaba declined to comment for this story, citing the quiet period ahead of its IPO.

Interviews with friends and past co-workers, most of whom declined to be named to protect their relationship with Xie, paint a picture of a deep-thinking and earnest colleague who is treated like family by Ma, but who never climbed to the top of Alibaba's management ladder - a reflection of the company's cut-throat but meritocratic culture.

And even as his fortune soared with Alibaba's rise, Xie remained largely unchanged from the shy boy who grew up in poverty as one of four children in a town near the Zhejiang province coastline.

Xie was introverted and studious, an above-average student with a preference for math and science, said Chen Liangming, the principal of Rui'an Middle School who taught Xie in his politics class in the 1980s.

Xie ranked in the top-20 students in his class, but not the very top - "the kind of marks you'd expect from a student who has some creative ability," said Chen, who asked Xie in 2012 for an alumni donation, and received a 200,000 yuan ($32,630) gift.

After graduating in 1992 with a degree in engineering from Shenyang University of Technology in northeastern China and working for a telecoms company in Hangzhou, Xie agreed to join Ma at Alibaba in 1999 as its first chief financial officer.

He was remembered for keeping meticulous records of how many pencils and reams of paper were purchased, and teaching other employees how to use Microsoft Excel, said a person who worked alongside Xie for close to 10 years.

In 2000, as Alibaba looked for new office space, Ma clamored for an entire floor of a downtown Hangzhou building while Xie argued it would be wasteful. Xie won the debate, but Ma was proved right as Alibaba's headcount quickly mushroomed, according to "The Legend of Alibaba" by Sun Yanjun, a veteran business journalist who worked with Ma on his first start-up, China Page, in the 1990s.

Keen to try other roles by the early 2000s, Xie pushed for greater involvement in the e-commerce business, friends say, and eventually made management rotations that included leading Alibaba's analytics and corporate strategy teams and managing the important Chinese website.

Yet even as his position changed every few years, Xie's name remained a constant alongside Ma's in some of the most critical documents binding Alibaba's business.

Chinese companies traditionally require at least two shareholders; that has been particularly true of domestic firms holding restricted government licenses. Chinese laws also forbid foreign ownership of internet companies.

As such, investors in Alibaba's New York-listed shares will in fact own stakes in a Cayman Islands-registered holding company that acquires its critical operating licenses, along with some of its revenue, from contracts with five Chinese firms known as variable interest entities (VIEs).

Besides the five companies that anchor Alibaba, Xie also holds an 11.6 percent stake in Zhejiang Alibaba E-Commerce, an affiliated company that contains Alibaba's payments processing and financial services arm, according to company filings as of March 31. The company is now called Zhejiang Ant Small & Micro Financial Services Group.

Zhejiang Alibaba controversially came into Ma's hands in 2010 after he voided its VIE contracts. Alibaba shareholders Yahoo and SoftBank vigorously protested the move, while Ma argued it was necessary to comply with anticipated Chinese central bank regulations governing foreign ownership of financial firms.

Xie has also been an instrumental partner for Ma in a variety of related party transactions. In April, Xie received a $1 billion loan from Alibaba to purchase a 20 percent stake in internet TV provider Wasu Media Holding – a move seen as part of Alibaba's strategy to break into the media industry. The same month, Xie and Ma paid 3.3 billion yuan ($538.4 million) for a 20.6 percent stake in China's biggest financial software firm, Hundsun Technologies.

"He's there because Jack (Ma) wants him there," said Drew Bernstein, managing partner for the China affiliate of the accounting firm Marcum Bernstein Pinchuk. "Jack must have some respect for him. He must have felt he belongs there, for things he contributed in the past, or what he can contribute in the future."

In its latest investor prospectus, Alibaba warned that Ma and Xie, given their joint investment activity, "may not act in our best interest" and that the company would incur substantial costs in the event Xie fails to repay his loan.

People close to Ma and Xie, who still live relatively close to each other in Hangzhou, said each appreciated the other's wit and sincerity and would visit each other's homes to dine, drink and play cards.

"He never reported to Ma, per se," one person said. "They spoke to each other like brothers."

Like Ma, who is known within Alibaba to speak in colorful allegories, colleagues said Xie's speech is also imaginative and steeped in historical references. An avid reader, Xie would recommend friends fantasy novels like the "Grave Robbers' Chronicles".

He's fond of making jokes and puns, particularly over cups of his favored baijiu, a fiery Chinese sorghum-based spirit also known as baigan. During one drinking session with colleagues in the early 2000s, Xie joked that he should stop drinking baigan, because the name of that spirit is a homonym in Chinese for "working in vain."

Despite his laid-back charm, some former colleagues said Xie never demonstrated first-rate leadership or ambition, especially as Alibaba saw explosive e-commerce growth.

In recent months, Alibaba named Zhang Hongping as managing director of Alibaba Capital, where Xie works, while much of the investment decision-making rests with Executive Vice Chairman Joe Tsai, people familiar with the matter said.

Xie confided to friends a desire for greater autonomy in making investment decisions. He wanted to invest not just to further Alibaba's strategic interests, but also to seek pure financial returns, one longtime friend said.

In his investments for Alibaba, Xie has overseen deals for e-commerce firms as well as travel-related sites QYer.com and 117go.com, and Kuaidi, a taxi-hailing app, one friend said.

Several friends said they were not surprised to see Xie excluded from the steering committee list, with one saying he noticed Xie's personal drive appeared to wane in recent years compared to younger, more ambitious rising stars like Eddie Wu, formerly Alibaba's mobile chief and now head of corporate development.

One investment colleague speculated it was Xie's even temper and a mutual understanding forged over 15 years that make him Ma's most trusted lieutenant.

"To be honest, Simon hasn't been that hungry in recent years. He feels happy where he is," the colleague said, adding: "Whatever old Ma says, Simon listens."